Stocks' roof caves in on housing market trouble

— -- Just when it looked like stocks could shake off last week's pain, shockwaves from the crumbling housing and mortgage markets Tuesday raised the risk Wall Street's recent setback could get uglier.

That put American Home's survival in question and served as a sharp reminder the fallout from the crumbling subprime mortgage market remains a big unknown. An early rally that had the Dow Jones industrials up 140 points fizzled. By day's end, it had swung 286 points to close down 146 points at 13,212.

Now investors are wondering if the housing market's problems will spill over into the economy. "Housing is the one wild card that could, if it takes consumer confidence down with it, take the economy into a recession," says James Stack of InvesTech Research.

Adding to the economic fears Tuesday, oil prices continued their relentless rise, climbing 1.8% to a record $78.21 a barrel.

But could the housing troubles yank the broad stock market into a morass just as the tech-stock implosion did in 2000? It may be a stretch, but the comparison may not be as outlandish as it may seem. Financial stocks have become the biggest part of the market, accounting for nearly a quarter of the value of the Standard & Poor's 500. Tech, at its peak, was the largest part at 35%.

Even top-tier financial firms are suffering. Bear Stearns, which recently said two of its hedge funds had lost almost all of their value because of subprime loans, has halted redemptions on a third fund because so many investors were demanding their money, according to Bloomberg News.